eos

The present controversies swirling around EOS and its recent freezing of a number of accounts — and the opaque way in which those decisions were made — present a golden learning opportunity for the crypto community. As the toolkit for smart contract dispute resolution, Sagewise is uniquely positioned to contribute to solutions. To that end, today we are releasing a tool to help verify frozen accounts and seek feedback from the EOS community.

First, we want to provide some background on the current situation and where Sagewise fits in. Shortly after the launch of the EOS blockchain in June, ECAF (its arbitration arm) began requesting freezes on certain accounts because of suspicious activity and evidence of theft. In taking this action, the body did not clearly communicate the procedures it had followed in making its decision. In one instance, it issued a freeze order and stated that it would later release the logic and reasoning behind the freeze order.

It is this apparent lack of transparency, rather than the actual freezing of the accounts, that has generated most of the backlash. In the eyes of many in the community, it runs counter to the ethos of decentralization that underpins blockchain.

There are also 19,587 wallets — representing 3.3 million EOS tokens — who lost these assets when the token migrated from Ethereum to the EOS blockchain. These are almost entirely people who bought the coin on secondary markets in the U.S., China, and other jurisdictions where EOS did not directly offer it. Because they purchased through secondary markets such as Binance, these holders did not receive instructions for participating in the token swap, and now that the swap has occurred, the smart contract is frozen and the tokens are effectively lost.

Sagewise offers a tool to the EOS community that solves this lost-during-the-swap problem as well as a solution for those who used a compromised tool to generate their EOS private and public keys. The tool provides transparency regarding any actions taken from within frozen accounts. Essentially, it allows someone to show evidence that they own an Ethereum address and to provide an EOS address to which they would like those tokens delivered. It also gathers and reports all data regarding both EOS and ETH contract balances and relevant actions. Ownership of an Ethereum address can be independently verified by the holder’s signing keys. This verification can be confirmed by any independent third party, adding to its reliability. Additionally, Sagewise will provide users with an easy to use guide to aid in registering a new EOS address association when needed.

While Sagewise is providing this tool, and it will be up to the community — which now fully controls the EOS blockchain — to determine how to use it. The community may decide that those who lost tokens did so as a result of dishonesty or negligence, and decide not to attempt to restore their lost assets. Or it may decide to give them a chance to be made whole in accordance with a set of guidelines. Whatever the outcome Sagewise is committed to providing solutions to help the community.

Much has been made online over EOS’s handling of its first arbitration case earlier this week. For those who don’t know, a group of the chain’s block producers made a decision to freeze specific accounts in response to an apparent theft. An arbiter has ruled to freeze the tokens for now and return them from the alleged thieves to their original holders. It appears, from the evidence, that the block producers judged the situation correctly as an attempted theft and that justice was served.

However, despite the seemingly happy resolution of this specific incident, the way it was handled raises important and troubling questions for EOS and the broader blockchain community, as many observers have noted in the days since the event. Crucially, the decision was made by an anonymous group of network insiders with no input from the broader community or recourse to challenge the decision. This inequitable decision-making power – you might call it centralization – seems to go against the egalitarian ethos of the blockchain community as well as EOS’s own Constitution.

This is not to imply that EOS is wholly in the wrong. As blockchain entrepreneurs ourselves, we are intimately familiar with the unexpected twists and turns inherent in building a technology platform. We are inclined to agree with those who say EOS’s action was an understandable, one-off fix to a fast-moving situation in which the correct action was clear. It was a fudge, but an understandable one, and certainly preferable to the alternative in that instant. Nevertheless, it underscores how much work there is left to do if we are to build an industry with strong, transparent, reliable safeguards for smart contracts.

There are some concrete solutions to which we as a community can make a commitment in order to build the strongest possible blockchain future. In the case of smart contracts and arbitration, businesses should adopt a few fundamental best practices.

First, we must remember that a strong blockchain platform provides the tools for people to make good decisions. Decentralization does not mean insulation; it just means that participants have control over their assets and information and with whom they decide to share them. Mechanisms for dispute resolution must be robust, but transparent. The reason so many commenters are upset with EOS is the opacity with which it and its block producers acted. All participants must understand and be able to trust the parameters of any transaction they enter into. This transparency must extend to the arbiters, and the community should be able to remove them if they are judged to be corrupt. Transparency, an understanding of best practices, and a strong, equitable system for resolving disputes will be increasingly important as the space matures.

EOS has certainly achieved a great deal already, and we celebrate the progress they have made in moving the technology forward. But that should not distract us, as this recent incident makes clear, from doggedly continuing to establish the tools and safeguards the blockchain space will need if it is to be successful. Transparency and reliability in smart contract dispute resolution are a great place to start.